Logistics

Perfect logistics entails all the elements of the process dovetailing like the components in a Swiss watch. Making sure they do is what we specialize in as a consulting company. "Perfect" is a combination of a large number of different demands on logistics: be they in B2B or B2C. Goods, products and replacement parts have to be at the right place at the right time, inexpensively and ideally bundled and packaged. And all that with reaction times of often just aLo few minutes, because many orders are dispatched immediately. The entire supply chain, the cooperation throughout the delivery process and logistics are growing ever more complex, and in many cases extend across the entire planet. Perfectly structuring these processes for logistics-intensive OEMs is our mission!

1/6Logistics is omnipresent– 24/7!

Logistics is everywhere, 24/7: the toothpaste when you get up in the morning and before you go to bed at night; the breakfast egg; the prefabricated concrete components on the building site; the replacement part for an industrial machine – it is all logistics. Without replenishment the production lines at BMW would be at a standstill, hospitals wouldn't be able to repair defective MRI scanners, construction projects wouldn't get the windows they need delivered and Amazon wouldn't have global sales of 178 billion dollars.

But logistics is far more than just "a truck drives goods from A to B". Indeed, the more accurate term is supply chain management – the planning and management of entire value chains. So logistics and supply chain management denote the organization of complex systems of goods flows and value chains. Transporting from A to B is just a tiny part of it! In order to ensure the best possible supply of what is required, companies/OEMs, suppliers, service providers and customers from various fields of industry have to interact efficiently.

This means mastering a combination of different demands simultaneously, regardless of whether in B2B or B2C. The goods have to arrive at the right place at the right time, at low cost and in exactly the form requested, employing the optimal network and of course with the least possible environmental impact. And that at ever-reducing reaction times, often of just a few minutes, because many a product is shipped immediately after being ordered. Amazon will soon – very innovatively – start offering same day delivery in large conurbations – a service that has long since been old hat in spare parts logistics. Because if an x-ray machine in a medical clinic or a conveyor belt in an assembly line breaks down, it cannot wait for hours or days to be repaired.

On top of that, in these times of globalization, cargo often has to be moved around the globe, crossing time zones and country borders, having been designed somewhere completely different to where it was produced. The short-lived nature of trends creates another challenge, because tomorrow, today's trend was yesterday – and many a manufacturer has been left sitting on mountains of unsellable products because their logistics and supply chain management wasn't up to scratch.

2/6Logistics - as perfect as clockwork

How does one organize perfect logistics? What clever ideas and concepts does modern logistics offer logistics professionals, OEMs, CEPs (courier express parcel services) and of course logistics consultants?

Which concepts help optimally manage logistics and supply chains and contribute to ensuring that the following components all interact like the cogs in a precision timepiece?

Procurement logistics

Production logistics

Distribution logistics

Reverse logistics

Waste disposal logistics

Modern enterprises with smart logistics and supply chain management not only connect these process steps with each other as a matter of course, they also work closely together with their completely integrated service providers in what is known as "collaborative planning", so that the borders are increasingly removed, for instance when the service provider operates the warehouse or replaces the customer's spare part on the shelf as soon as it is sold.

The interactions within a well-organized supply chain provide for feedback loops. For example, the repair cycle has an influence on the product-development process, because a well-made product either doesn't break down at all or is easy to repair and get back into commission if it does.

The following developments hold a lot of potential: data are increasingly being pooled in companies with modern logistics and professional supply chain management, and all parties involved are networked with each other (often in the Cloud), enabling the supplier to see, for example, what has been sold, and to replenish the stocks immediately and just in time. The forwarder, who is also linked up with the system, is already in the starting blocks, because it can instantaneously see when and where goods are needed. Everyone is pulling in the same direction with the same goal: perfect logistics, because the competition is tough!

You can see how that works and what benefits collaborative planning has in our brief video:

3/6Logistics and supply chain management as a comprehensive concept

Speed is definitely at the core of all these considerations! How can I get the product, spare part, etc. to the client's venue quickly? Another variable is the cost.

A warehouse full of expensive spare parts ensures that production never has to stop, but it is far too costly. Being more frugal can keep the costs for replacement parts and storage, etc. low, but it can ultimately prove very pricey for an OEM if business comes to a standstill because of a lack of a given part! So the challenge is to find the best combination of cost, reliability, speed, reaction times, needs and much more besides. This requires a clever overall concept comprising modern supply chain management, network planning, collaborative planning, cloud data management and many other things, which in view of the complexity of the task generally means an optimization calculation within the scope of a multivariate simulation model.

4/6Innovative concepts in logistics: more efficiently from A to B

Within the overall concept there are many interesting smaller ways of intelligently supporting logistics and supply chain management. Indeed, there are pretty smart ideas behind many of the terms in the logistics field!

PUDO stands for "Pick-Up Drop-Off Point". What it means is essentially a receptacle at a central place – for example a locker at a gas station or a packaging station – where spare parts deliveries can be deposited. This means that the technician doesn't have to drive all the way to the warehouse every time a part is needed. Instead, a usually unmanned PUDO is filled by delivery trucks that also take the old parts with them. The benefit here lies quite clearly in the route optimization!

FSL: The idea behind a "forward stocking location" is that it is closer to the client. Similarly to PUDO, it refers to mini warehouses – in this case manned – that the manufacturer runs either itself or has operated by a service provider (e.g. DHL), so that the most important replacement parts or products are closer to where they are needed and can therefore get there faster.

Hub & spoke: This logistics concept, which is now used in millions of places, brings forth the image of a bicycle wheel, with a hub in the middle and numerous spokes leading away from it. With hub & spoke there is no 1:1 relationship between the sender and the recipient of goods, parts, etc. Instead, the products are held centrally and sent out in bundles to customers all around the world, which is less expensive and environmentally friendlier than shipping individual parts to individual clients.

Crossdocking is a concept that makes use of the time and cost benefits of prepacking at the sender. The packages then only have to be transshipped at the interim warehouse or distribution center. Here too, the delivery is not directly to the customer, so that the logistics can be managed more efficiently by bundling!

Merge in transit: Another commonly used concept in logistics! Here, parts come from various places or warehouses and meet on the road, let's say in the middle of the trip to the customer, and are then bundled together. This reduces the distances travelled and is less expensive and fast!

5/6 Perfect logistics: the "right" inventories

A lot of what logistics and supply chain management is about is having the right amounts at the right place at the right time. So the "right" inventory is the key variable at the start of a series of activities, and it has to correspond to the actual need. What influential factors and parameters are here the indicators of what is "right"?

Inventory health: This is without doubt an important key figure for determining whether the inventory is right or not. Are the right amounts of the right parts in the warehouse or in stock? Which parts are needed often, which ones never? The answers to these questions generally come from ABC and XYZ analysis, consumption, scope, costs, etc. can be calculated in various ratios to come up with other useful ratios. One of these is the "turn" (3/5/20 p.a., depending on the industry) of the overall inventory. Comparative figures, benchmarks and industry figures indicate whether the inventory is "healthy". An inventory is considered unhealthy if parts of it are needed either rarely or not at all, or if it contains too many parts, be they the wrong ones or the right ones.

Long tail: This term refers to the large, unchanging excess of C parts in an ABC analysis that companies no longer simply cut off. "Cut the long tail" is a thing of the past! Today, suppliers no longer store rare C parts in their own warehouses, but instead offer them through their network, straight from the manufacturer, for which a C part may not be a C part at all because it is precisely the area in which the manufacturer is a specialist, and the C part is an A part for it! Cooperation and data networking are trump here!

E&O excess/Obsolescence: Frequently, products can be found in warehouses, in inventory management systems and/or in other places throughout the process chain, that are in excess or obsolete, and that therefore neither move nor are used. In industries where the regulations are tough, such as in aviation, a part cannot be used after it has reached its expiry date, just as if it were an old yoghurt in a supermarket. Parts also often become obsolete in the wake of technical changes and improvements, to say nothing of situations in which simply too many parts were bought and left to sit on the shelves in the warehouse. E&O is an important factor for a healthy inventory, well organized logistics and a perfect supply chain!

Vendor managed inventory (= vendor managed replenishment): Manufacturers are increasingly turning to this method to prevent E&O. Here, the supplier plans, manages and organizes the manufacturer's inventories and assumes the entire responsibility for costs, part availability, etc. similarly to shelf replenishment services offered by external providers in supermarkets. In this way, the supplier becomes a partner integrated into the value chain, and can do a better job less expensively because it is a specialist, unlike the OEM, which can then focus more on its core business! This is both the goal and the success factor:

Focus on your core business and leave the rest to others who can do it better and cheaper!

6/6Logistics success is measurable!

Fortunately, logistics and supply chain management are easily quantifiable disciplines. Numbers, dates and facts make the status quo and successes highly measurable! Which key figures provide a good overview of a company's logistics performance? What can one actively work on in order to join the ranks of the supply chain champions?

The goal is to achieve 100% fulfilment of OTDR with professional supply chain management, because the OTDR correlates directly to the client's satisfaction level – anybody claiming otherwise is quite simply mistaken

Service level/Fill rate: This is an important key figure for measuring how well the logistics system is working. The central question is what percentage of the orders are delivered on time, in the required quality and to the right location? Of course, everyone involved wants this figure to be near 100%.

Available to promise (ATP): This term denotes an optimized overall process including planning, warehouse and stock management, capacities, logistics, and much more besides. All of these factors are decisive in determining the ability to uphold delivery commitments!

To improve the measurement of the success of the logistics and supply chain, the entire process can be broken down into individual factors and variables. Many of these are measurements of times.

Turnaround time (TAT): An important indicator of the time required to deal with an "incident", measured from the moment the customer's call reached the call center. A turnaround time that wasn't up to market level has caused the downfall of quite a few providers!

Order to cash: This indicator observes the process of monetizing an order, and is not only a key figure for logistics and the supply chain, it is also a good measure of the company's cash management and of customer satisfaction: "Order to cash" measures the time from the customer placing the order (e.g. in the call center) until the money arrives in the bank account. This figure is a very broad consideration of the process and customer satisfaction, based on a very simple but decisive measurement variable at the end of the process: if the client is happy, it pays!

Cut off time: This is a simple time, but it is a crucial one, because if a late cut off time is to be successfully mastered, the logistics involved has to run very smoothly. The cut off time is the latest point in time of the day by which an order can be accepted and delivered the next day – in the replacement parts business a critical competitive factor! If the x-ray machine in a clinic breaks down at 1 p.m. and the cut off time is midday, the radiology department is out of order for two full days instead of just overnight! It demands professional and cutting-edge logistics from the manufacturer to be able to offer the latest possible cut off time and the shortest possible down times.

On time delivery (OTD/OTDR/OTDC): As the term suggests, "on time delivery" is about punctual delivery and meeting the delivery commitment. It divides up into "Requested" vs. "Committed", and this is where the problem begins: the customer calls and requires the replacement part by 5 p.m. next Tuesday (OTDR). The supplier can't do that and commits to 6 p.m. on Wednesday (OTDC). If you measure the fulfilment of the goal on the basis of the OTDC, the manufacturer has fulfilled its promise 100 % – but lost the customer!